Soft Credit Inquiry: Meaning in a Merchant Cash Advance
A soft credit inquiry is a credit check that doesn't affect your credit score. Many funders and brokers use soft inquiries to prequalify a file, and they show on your own credit report but not to other creditors.
What does soft credit inquiry mean?
Credit bureaus split inquiries into two kinds. A hard inquiry happens when you apply for new credit and the creditor checks your report to make a decision, and it can lower the score a little. A soft inquiry happens for background reasons, like a prequalification or your own check of your report, and doesn't count against you.
Why does soft credit inquiry matter to your business?
Owners worry about shopping for funding because each application will ding their score. Merchant cash advance funders often run only soft checks early on, and some never run a hard one. Asking which kind will be used lets you shop without hurting your score for nothing.
Does checking your own credit count?
Your own checks are always soft. The Consumer Financial Protection Bureau explains credit reports and inquiries at consumerfinance.gov, and you can get your reports free at annualcreditreport.com.
Is business credit separate?
Business credit bureaus like Dun and Bradstreet keep their own files on companies, separate from your personal report. A funder checking business credit doesn't touch your personal score at all.
Where will you see it?
In the authorization language on an application. On your personal credit report, in a section for inquiries that only you can see. In a funder's or broker's description of its process.
What should you ask?
- Will this check be soft or hard?
- If there will be a hard inquiry, at what point?
- Does the funder report the advance to business or personal credit bureaus?
Which terms are related to soft credit inquiry?
The full list is in the glossary. Owners ask about this in Do funders look at profit or revenue for an MCA?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.